Hydropower Group Pushes to Expand Tax Break Through 2018

April 16 (Bloomberg) -- The U.S. hydroelectric power
industry, seeking a five-year extension of a federal tax credit,
is lobbying for political support beyond the three Western
states that account for half its production capacity.

The National Hydropower Association, whose members include
Duke Energy Corp., released a map today showing the industry
supports more than 1,900 U.S. companies, most located east of
the Mississippi River.

The industry is lobbying to preserve or even expand a 1.1
cent-per-kilowatt hour tax break that expires at the end of
2013. Doubt about the tax break’s future is already slowing
development for projects that require long lead times, industry
officials say, echoing an argument used by wind- and solar-energy producers.

The map shows “the broad economic impact that our hydro
industry has in our communities,” Linda Church Ciocci,
executive director of the Washington-based group that includes
the New York Power Authority and Exelon Corp., said in an
interview.

While hydroelectric power may summon images of huge
engineering projects, such as Washington state’s Grand Coulee
Dam completed in 1942, Ciocci said including the tax credit in a
2005 energy law has increased development.

The industry had “minimal growth” through the 1990s and
most the next decade, the group said in a March 27 letter to
Senators Jeff Bingaman, a New Mexico Democrat, and John Cornyn,
a Texas Republican. Both sit on the Senate Finance Committee.

Slow Growth

Since 2005, 85 projects to upgrade or expand facilities in
22 states received the production tax credit, according to the
letter, costing taxpayers about $75 million. The projects can
supply power for about 84,533 homes, according to the trade
group. Wind and solar growth has been faster.

Hydro accounted for 6 percent of total U.S. electricity in
2011, and about 63 percent of the power from renewable sources.
More than half of U.S. hydropower is generated in Washington
state, Oregon and California, according to the Energy
Department.

Hydro Green Energy LLC, a Westmont, Illinois, company that
adds hydropower generation to dams used for irrigation or flood
control that don’t generate electricity, is developing 33
projects in 15 states. The plan is to produce about 400
megawatts of power, enough for about 230,000 homes, and each
project will create 140 jobs, according to the company.

Projects Delayed

Uncertainty about the future of the tax credit led Hydro
Green to delay 11 of the 12 projects under review at the Federal
Energy Regulatory Commission, which oversees the electricity
market, according to the association. The trade group wants the
break extended to 2018.

Only 3 percent of the dams in the U.S. can produce power,
giving the industry room to expand with sufficient government
incentives, Ciocci said.

The association, which is holding its 2012 convention in
Washington this week, also is lobbying for quicker permitting at
the commission, which now can take five years. Wind producers
receive a 2.2 cent-per-kilowatt hour tax credit, double that is
available to the hydro industry.

Industry executives will hold a rally on Capitol Hill
tomorrow in their effort to back renewal of the tax benefit.

While bills extending renewable tax credits have been
introduced in the House and Senate with bipartisan support, some
Republicans are seeking an end to energy subsidies as Congress
seeks ways to trim the deficit.